GOLD and CRUDE OIL TRADE ALERT and BROAD STOCK MARKET UPDATE (2:30 pm EDT)
In Monday's blog on gold and silver I wrote:
"Could we have seen the bottom of the recent steep correction in these metals with last Thursday's lows of $1,286 in gold and $16.85 in silver (spot prices)? It's possible, but we are now approaching another significant reversal zone for precious metals (Sept. 27 - Oct. 6), and there was no intermarket bullish divergence signal last week (both metals made new lows). Commitment of Traders (COT) charts are still looking somewhat bearish so I think gold and silver prices could move lower into this upcoming reversal zone."
Despite the Monday and Tuesday surge in gold and silver prices, we were wise to be cautious as both metals plunged lower yesterday and today and are indeed making new lows as we enter the Sept. 27 - Oct. 6 reversal zone. Since both gold and silver are making new weekly lows, we have no intermarket bullish divergence signal this week. However, as with the broad stock market, this reversal zone continues through all of next week so we could get that signal then. Today gold bounced strongly off of support in the $1,280 area and is closing near $1,290. That is bullish behavior, the cycle timing for a low is due this week, and we are now inside the reversal zone for gold (and silver). For all of these reasons I am going to enter a long position today in gold. We can set a close stop loss for this trade on a close below $1,270 or if gold and silver both make new lows next week. It's possible we are seeing gold's low now and will see silver's low next week for a strong case of bearish divergence (and a buy signal for silver). Going long in gold today but still out of silver.
Crude oil prices surged today to $52.86 (Nov. contract chart) before falling and closing the day around $51.50. That is bearish behavior. We are just past the center of the current reversal zone for crude oil (it ends next week on Monday) so today's high could easily be a significant top to the current rally. Our target for this rally was $53 - $54. I think $52.86 was close enough so I am going to take a decent profit here (we bought at $48) and sell my long position in crude today. Could it push higher? Yes, but some sort of corrective dip is likely now, and we might be able to buy again near the next reversal zone for crude in the last week of October. Taking profits and selling my long position in crude oil today.
The broad stock market has been unusually difficult to call recently as it seems reluctant to take any significant correction, yet it's rallying also seems to lack enthusiasm. We are now entering a strong reversal zone for this market (Sept. 27 - Oct. 6). On Monday I speculated that equities would fall into this reversal period and that we should be looking for a low to buy, but now it looks like we could instead get a high and top to possibly sell short. Yesterday the S&P 500 made a new all-time high, but the DOW still has not (it is close), and the NASDAQ is also still below last week's (all-time) high. We therefore have an intermarket bearish divergence signal until the DOW and NASDAQ break their highs (22,420 in the DOW and 6,478 in the NASDAQ COMPOSITE INDEX (COMBINED) and 6,026 in the NASDAQ 100 INDEX(E-MINI) Dec. contract). Because directional momentum in all three indices is currently almost 100% bullish and this reversal period extends through all of next week, I think it is too early to consider selling short. If we get more bearish divergence next week, however, we will seriously consider a short position. On the sidelines of the broad stock market.
In Monday's blog on gold and silver I wrote:
"Could we have seen the bottom of the recent steep correction in these metals with last Thursday's lows of $1,286 in gold and $16.85 in silver (spot prices)? It's possible, but we are now approaching another significant reversal zone for precious metals (Sept. 27 - Oct. 6), and there was no intermarket bullish divergence signal last week (both metals made new lows). Commitment of Traders (COT) charts are still looking somewhat bearish so I think gold and silver prices could move lower into this upcoming reversal zone."
Despite the Monday and Tuesday surge in gold and silver prices, we were wise to be cautious as both metals plunged lower yesterday and today and are indeed making new lows as we enter the Sept. 27 - Oct. 6 reversal zone. Since both gold and silver are making new weekly lows, we have no intermarket bullish divergence signal this week. However, as with the broad stock market, this reversal zone continues through all of next week so we could get that signal then. Today gold bounced strongly off of support in the $1,280 area and is closing near $1,290. That is bullish behavior, the cycle timing for a low is due this week, and we are now inside the reversal zone for gold (and silver). For all of these reasons I am going to enter a long position today in gold. We can set a close stop loss for this trade on a close below $1,270 or if gold and silver both make new lows next week. It's possible we are seeing gold's low now and will see silver's low next week for a strong case of bearish divergence (and a buy signal for silver). Going long in gold today but still out of silver.
Crude oil prices surged today to $52.86 (Nov. contract chart) before falling and closing the day around $51.50. That is bearish behavior. We are just past the center of the current reversal zone for crude oil (it ends next week on Monday) so today's high could easily be a significant top to the current rally. Our target for this rally was $53 - $54. I think $52.86 was close enough so I am going to take a decent profit here (we bought at $48) and sell my long position in crude today. Could it push higher? Yes, but some sort of corrective dip is likely now, and we might be able to buy again near the next reversal zone for crude in the last week of October. Taking profits and selling my long position in crude oil today.
The broad stock market has been unusually difficult to call recently as it seems reluctant to take any significant correction, yet it's rallying also seems to lack enthusiasm. We are now entering a strong reversal zone for this market (Sept. 27 - Oct. 6). On Monday I speculated that equities would fall into this reversal period and that we should be looking for a low to buy, but now it looks like we could instead get a high and top to possibly sell short. Yesterday the S&P 500 made a new all-time high, but the DOW still has not (it is close), and the NASDAQ is also still below last week's (all-time) high. We therefore have an intermarket bearish divergence signal until the DOW and NASDAQ break their highs (22,420 in the DOW and 6,478 in the NASDAQ COMPOSITE INDEX (COMBINED) and 6,026 in the NASDAQ 100 INDEX(E-MINI) Dec. contract). Because directional momentum in all three indices is currently almost 100% bullish and this reversal period extends through all of next week, I think it is too early to consider selling short. If we get more bearish divergence next week, however, we will seriously consider a short position. On the sidelines of the broad stock market.
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